AUSTRALIAN PORK LIMITED - Annual Operating Plan 2019-20
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AUSTRALIAN PORK LIMITED
Annual Operating Plan
2019-20Australian Pork Limited Annual Operating Plan 2019-20 Message from the CEO It is my pleasure to present the 2019-20 Annual Operating Plan for Australian Pork Limited (APL). This Plan outlines the activities and associated resources envisaged to meet the objectives contained within the APL Strategic Plan 2015-2020. It is the sixth and final Annual Operating Plan operating under this Strategic Plan. A small part of the resources that you will see in the pages following concern the development of a new APL Strategic Plan 2020-2025, as a consequence of our regular strategy cycle. It is APL’s intention that the once in five years opportunity is taken to develop a bold position on how to shape the industry’s and company’s future, by working closely in particular with our most important stakeholders being Australia’s pig producers. Additionally, government – as a significant investor in APL and the industry – will be consulted on their objectives that our industry can have an impact upon. Over the past couple of years, the industry has seen some rapid growth in processed pig numbers and pork volumes which have put significant pressure on pig prices at the farm gate. This pressure has unfortunately seen some producers withdraw from the industry as their financial status was severely affected, as well as other producers reduce their level of production in an effort to regain an appropriate balance between supply and demand. The positive side of the increase in production was an impressive increase also in consumption, in particular of fresh pork domestically. Demand volume growth is now limited by the reduced supply numbers, still coming through the pork production pipeline. The other key issue impacting on the industry globally is the outbreak of African Swine Fever (ASF) in China and other parts of the world. The domestic production and global disease issues have impacted on the shape of our resource allocation for the 2019-20 year. With a more limited supply of pork in the coming year, we can work on a maintenance strategy for demand rather than the growth strategy which has driven our marketing efforts for the best part of the last decade. A maintenance strategy, with the reduced resources required, opens up our abilities to focus more on building our international presence (considering the reduced supply issues developing in Asia working in our direction) as well as testing new concepts around participating in the domestic ham and bacon markets at a higher level than recent history (also supported by a likely international price increase for pork driven by the disease issues).
Australian Pork Limited Annual Operating Plan 2019-20
The expected reduced numbers of pigs to be produced in the 2019-20 year (down from 5.4 million
in the year to end February 2019 to an expected 4.9 million in the year to end June 2020) will have a
proportionate impact on the income of APL; reduced in the vicinity of 10 per cent year on year. This
will bring with it even greater pressure to ensure that we are investing in the most attractive
initiatives for the future success of the industry.
A number of reviews of APL’s performance were undertaken in 2018-19, including of the marketing
area, the R&D and innovation area and a general performance review routinely conducted in the
prelude to re-negotiating APL’s funding agreement with government.
These reviews have also impacted on how we intend to invest for the industry in the coming year,
including through:
• In marketing, increasing the areas of operation from domestic fresh to domestic fresh,
domestic differentiation and international differentiation
• In the innovation area, reducing the number of activities that we are performing in the
interests of a stronger focus on critical strategic intents for a greater impact on the industry,
alongside building the skills internally that we will need to carry this forward
• In the general performance area, getting better at evaluating the benefit of what we do on
behalf of industry, as well as structuring ourselves to better represent communication and
membership relationships as a critical part of what we do. The review also recommended a
few paths to follow in our strategic plan elaboration that could add value.
Considering the predicted impact of ASF globally, of course our intentions around keeping our pigs
safe from this and other diseases remains top of the list of priorities. Our ongoing interest in the
biosecurity space is reflected in a plethora of activities designed to minimise the risk of new diseases
in our herd – through technical projects, working with the relevant government authorities and
communicating frequently with industry. The Australian pig herd hasn’t seen a risk of emergency
disease such as we now face in my 14 years in the CEO role.
The financial plans resulting from our intended resource allocations for the coming year result in a
planned deficit of $623,000. This deficit fits into the longer-term planning around our reserves levels,
the policies for which pick a pathway between having some sufficient funds to cover unexpected
issues if necessary but not holding lavish levels of funds not working for industry good. Thus,
reserves will remain at or above the minimum required level. As always, we have designed this
operational plan to deliver at the highest possible level to our investors – Australian pig farmers and
the Australian Government. We know that to achieve this, we need to continually make our product
more desirable, our industry more transparent and our animals healthier, more productive and more
content.
Andrew Spencer
Chief Executive OfficerAustralian Pork Limited Annual Operating Plan 2019-20 CONTENTS The Competitive Environment 1 Domestic Market 1 Export Market 5 Operational Planning Principles 6 Activity Hierarchy 6 Key Performance Indicators and Result Areas 7 Strategic Objective 1 – Growing Consumer Appeal 9 Industry Outcomes 9 Programme 1: Better Pork 9 Programme 2: Pork Made More Popular 9 Programme 3: Increasingly Different 9 Risks & Opportunities 10 Key Performance Indicators 11 Strategic Objective 2: Building Markets 13 Industry Outcomes 13 Programme 1: Market Insights 13 Programme 2: Domestic Market Development 13 Programme 3: International Market Development 14 Risks & Opportunities 14 Key Performance Indicators 15 Strategic Objective 3: Driving Value Chain Integrity 17 Industry Outcomes 17 Programme 1: Trust in Pork Provenance 17 Programme 2: Pork Quality Assured 17 Programme 3: Fairness in Risk and Reward 18 Risks & Opportunities 19 Key Performance Indicators 20 Strategic Objective 4: Leading Sustainability 22
Australian Pork Limited Annual Operating Plan 2019-20 Industry Outcomes 22 Programme 1: Addressing Societal Needs 22 Programme 2: Healthy Herds and Farms 22 Programme 3: Continuous Productivity Growth 23 Risks & Opportunities 23 Key Performance Indicators 25 Strategic Objective 5: Improving Capability 27 Industry Outcomes 27 Programme 1: Applied Learnings 27 Programme 2: Building Industry Image and Reputation 28 Programme 3: Operational Effectiveness 28 Risks & Opportunities 29 Key Performance Indicators 30 Government Research Priorities Attributed to R&D Programme 32 Definitions of Financial Terminology 33
Australian Pork Limited Annual Operating Plan 2019-20
The Competitive Environment
Domestic Market
The latest data that we have from the Australian Bureau of Statistics tells us that around 5.38 million
pigs have been processed in the twelve months to the end of March 2019. This figure is month by
month diminishing and is expected to bottom out at somewhere between 4.9 million and 5.1 million
by mid-2020.
Graph 1: Monthly and Moving Annual Total Pig Slaughter Numbers in Australia 2014–2019
Pig slaughters hit a high on a moving annual total basis to the end of October 2018 at 5.427 million
and have declined in the five months since. The majority of the expected dip in production is
predicted to happen (according to production survey responses) in the second half of calendar 2019.
Given that pig prices are relatively healthy at present (although grain prices remain high), there is no
strong longer-term pressure to reduce numbers; just the opposite in fact due to the global African
Swine Fever problems, particularly in China.
1Australian Pork Limited Annual Operating Plan 2019-20
National Average Baconer (60-75kg) Price (cents per kg)
400
380
360
2014
340
2015
320
2016
300 2017
2018
280
2019
260
240
220
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Graph 2: Average Australian National Baconer Prices Surveyed by APL 2014–2019
Grain Prices
High grain prices are the biggest factor in producer profitability presently in Australia’s pork industry,
given that pig prices have returned to positive levels in 2019. There is a significant domestic premium
over global grain prices in Australia which can only be corrected with a sharp improvement in the
prospects for the 2019 winter grain crop (particularly in the east of the country) or a sharp increase
in grain imports (which is unlikely due to biosecurity requirements).
2Australian Pork Limited Annual Operating Plan 2019-20
Graph 3: Monthly Major Grain Price Trends 2014–2019
Beef
Meat and Livestock Australia released projections for the beef industry in April 2019 which can be
accessed on the MLA website.
In general, the projections reflect significant natural turmoil across Australia including floods in
Queensland and drought across much of the rest of the nation. Forced herd liquidation and stock
losses have led to the largest drop on the national herd for decades.
At 7.7 million head, the forecast adult slaughter numbers for 2019 are less than those already low in
2018. The reduced slaughter and lower carcase weights due to difficult conditions will lead to a three
per cent decline in production to 2.2 million tonnes.
“Looking ahead, the significant depletion of the herd will result in lower slaughter rates and fierce rebuilding
competition once there is a widespread break in the weather.”
Like last year, cattle price expectations for the medium term are therefore somewhat weather
dependent and could be expected to rise with good general rainfall.
Sheep Meats
Meat and Livestock Australia released projections for the sheep industry in 2019 which can be
accessed on the MLA website.
Lamb slaughter in 2019 is expected to be the lowest since 2012 at 21.2 million head (seven per cent
decline year on year), producing 475,000 tonnes of product. Mutton production will see an even
greater drop in production of 16 per cent to 188,000 tonnes.
Key reasons for the decline continue to be the ongoing drought across many regions and the linked
high cost of feed.
3Australian Pork Limited Annual Operating Plan 2019-20
“Longer term, high prices across both sheepmeat and wool provide a strong incentive for producers to rebuild
their heavily depleted breeding flocks once conditions allow.”
Lamb prices will be influenced by future weather conditions but demand would still support
reasonable prices under most conditions.
Chicken
Chicken continues to be the “price” buy at retail, significantly cheaper than other protein options,
and this will likely drive consumption growth - alongside competitor supply issues - at retail over the
next year.
Pork
Consumer demand continues for fresh pork, but supply issues will limit volume consumption growth
going forward. Stronger global prices may put some pressure on bacon and ham processors and
their import purchasing plans due to the global African Swine Fever epidemic.
Pork Imports
Import volumes have not been moving until earlier in 2019 when larger than expected volumes
entered in January and March (anecdotally due to some special deals coming out of the US). There
may have also been some forward buying considering the pressure to come onto global volumes in
months ahead.
Graph 4: Australian Pork Import Volumes – Monthly and Moving Annual Total 2014–2019
Commentators are predicting a shortfall in pork production in China over the next couple of years
of up to 18 million tonnes, which is completely impossible to replace by increased production in
other parts of the world. At best, only three to four million tonnes of extra Chinese imports are
possible and even this will place great stress on pork demand globally.
4Australian Pork Limited Annual Operating Plan 2019-20
Graph 5: Australian Pork Production, Imports, Exports and Apparent Consumption 2012–2019
Export Market
Graph 6: Australian Pork Export Volumes – Monthly and Moving Annual Total 2014–2019
Export volumes have come off as domestic pig prices have improved over the past year, leading to a
growing unwillingness to continue supplying very cheap overseas markets. Strategic markets such as
Singapore continue to provide a strong volume outlet and dynamics look good for increasing global
prices with ASF induced production challenges.
5Australian Pork Limited Annual Operating Plan 2019-20
Operational Planning Principles
This section of the Annual Operating Plan outlines some of the working principles in structuring our
plans to enable a better understanding of the links between the APL Amended Strategic Plan 2015–
2020 and the content of this document.
Activity Hierarchy
The APL Amended Strategic Plan 2015–2020 was developed in association with our key stakeholders
and others with an interest in our industry.
In this Annual Operating Plan, every activity is designed to contribute to the achievement of the
Strategic Plan, directly or indirectly. This discipline is formalised through the hierarchy of activities
back to the strategic objectives of the Strategic Plan according to the following order:
Level 1 – Strategic Objective (five Strategic Objectives for the full term of the Strategic Plan)
Level 2 – Programme (three per strategic objective for the full term of the Strategic Plan)
Level 3 – Project (may change from year to year)
Level 4 – Activity (may or may not exist under a project)
The table below is an overview of the structure of the Strategic Plan. The table includes the five
Strategic Objectives, their relevant outcome statements and the responsible strategy champion.
6Australian Pork Limited Annual Operating Plan 2019-20
As outlined in the “Message from the CEO”, the 2019-20 year is a year of transition in our approach
to strategic planning. This transition had as its catalyst the R&D review which highlighted the
opportunity for APL to become more strategically focussed, with a tighter, more impactful portfolio
of activities.
The R&D Innovation Review recommended that APL establish a new model for APL’s investments,
with this model to be known as Industry Solutions and Horizons. The recommendations were
endorsed by the APL Board in February 2019. The model builds on the strengths of APL’s current
RD&E model (namely that it was robust, accountable and appropriately governed) and will be more
agile and strategic in addressing industry needs. It will also be more diverse in investment
approaches, commissioning pathways and partnership options. This new governance and engagement
approach will replace the existing 18-month call-commission-commercialise funding cycle, with the
two streams of investment – Industry Solutions and Horizons – enabled by new processes.
The Solutions portfolio will focus on responding to the immediate needs of industry, will be open for
proposals year-round and will have streamlined management and approvals. The Horizons portfolio
will focus investment through the development of a small number of Strategic Intents that will focus
on delivering outcomes, over a longer period (3–5 years), that support transformative improvements
to industry and lead to increased industry competitiveness through substantial reductions in cost,
increased revenue and new options for risk management.
Strategic Intent fund areas will be developed and prioritized through a process of stakeholder
consultation, as part of the development of the 2020–2025 Strategic Plan. These engagement
activities will be externally facilitated.
This model has application and relevance to APL’s investments in RD&E activities as well as in non
R&D. This investment model is planned to be applied across all APL initiatives, both R&D and non
R&D. It is envisaged that whilst consultation takes place, two initiatives that have been presented and
approved by the APL Board and presented and agreed to by the APL Delegates Forum (International
Business Development and Eating Quality Improvement) are used to create examples of “Strategic
Intents”.
The actions required to implement the new model will be summarised following stakeholder
engagement.
Key Performance Indicators and Result Areas
The APL Amended Strategic Plan 2015–2020 includes aspirations for industry achievements. The
activities of APL are designed to positively contribute to achievement of these aspirations. These
aspirations are described as “Key Result Areas” and include measures such as the consumption of
pork, the value of the industry at the farm gate, industry productivity measures and shifts in
production systems.
While APL does not have control over achievement of these industry aspirations, it is clear that we
have some influence.
Using a mixture of internally focussed Key Performance Indicator measurements in conjunction with
the externally focussed Key Result Area measures, APL can develop an informed objective view
about the wellbeing of the industry and the scale of APL’s contribution to it.
7Australian Pork Limited Annual Operating Plan 2019-20
Previous performance reviews of APL have queried the relevance of measuring the performance of
APL through the industry’s success in achieving these externally focussed Key Result Areas. We have
a strong belief that our performance culture is one that can discriminate between what we can fully
control and what we can only partially impact, and that partial impact is not a reason to avoid making
a positive contribution.
This year it is worth overtly highlighting that some of the Strategic Objective 1 and Strategic
Objective 2 Key Performance Indicators and Key Result Areas show declines. This is a consequence
of two factors. Firstly, slaughters are budgeted to decline from 5.3 million to 4.9 million which
reduces both meat available and funding available. Secondly, there has been a change in emphasis in
the 2019-20 year which increases allocations to domestic differentiation marketing and international
marketing. Both of these reduce allocation in this plan to fresh pork domestic marketing which will
slow long term progress for this particular year.
8Australian Pork Limited Annual Operating Plan 2019-20
Strategic Objective 1 – Growing Consumer
Appeal
Industry Outcomes
The Strategic Plan outcome statement is “Making Australian pork uniquely valuable to consumers
and increasingly a part of their eating pleasure, resulting in repeated choice”. Whilst pork’s
popularity has increased in recent years, the 2019-20 period is likely to see less Australian pork
consumed but at higher prices to producers as production volume is forecast to decline.
This objective remains the main pillar of demand creation and will leverage consistent activity and
consumer learnings to match demand with supply. It is planned that this will maintain demand for
both consumer enjoyment and good value for money.
Programme 1: Better Pork
This programme is an increasing focus across APL. This programme seeks to leverage new APL
eating quality research published in 2018-19. This represents a significant investment in time,
expertise and project costs to collaborate across value chains to extend the latest APL research into
commercialisation. In addition, further pork quality improvement experiments are planned to be
conducted during 2019-20.
This programme overlaps with SO2 and SO3 in that both domestically and internationally there are
opportunities for improved quality pork products throughout the value chains.
Programme 2: Pork Made More Popular
Lack of industry profitability in 2018-19 has caused some production decreases, meaning there will
be less Australian pork available in 2019-20 compared to the previous year. Despite this, consumer
awareness and positive associations will continue to be maintained and converted into shoppers
being prepared to pay more for pork than in the previous year. The effectiveness of the outcomes to
date justify continued investment as we move from a growth strategy in an oversupply situation in
2018 to a maintenance strategy whilst supply is subdued in 2019-20.
Investment in communicating the “versatility” and “ease of cooking” pork messages pillars will
continue at maintenance levels.
Programme 3: Increasingly Different
This programme was previously focused on parts of the supply chain using Australian pork in ham
and bacon, via activity around the PorkMark. This year sees the programme expand to more
mainstream supply chains and influential consumers and ambassadors of pork.
During 2018-19 APL invested in detailed consumer investigations to understand what would
motivate people to choose Australian over imported pork, and their level of understanding of the
new CoOL system. Most Australians prefer to buy Australian grown pork both (subject to price and
availability) to support farmers and because they believe that Australia’s farming standards are high,
9Australian Pork Limited Annual Operating Plan 2019-20
resulting in great products. This programme seeks to reinforce and validate those beliefs, via
education around the amount of imported pork in the market and driving quality messaging with
those consumers prepared to pay a premium.
To begin to build a deeper understanding of Australian vs imported pork, a significant trial is planned
in 2019-20 to test whether people who say they prefer to buy Australian, will actually do so. This
represents an increase in investment to find ways to effectively compete with other sources of pork
and measure any consequential changes in outcomes.
Risks & Opportunities
Opportunity – the planned eating experience initiatives have a science-based approach and
there is a desire amongst many supply chain marketers in the commercial arena to make a real
difference.
Risk – Moving from a ‘Fresh Pork’ growth strategy to maintenance strategy risks decreasing
investment too much, resulting in a demand decline. In addition to monitoring historical
performance using identical messages, some agreed “trigger points” have been pre-set to act as
prompts to action as we continually monitor market results.
Opportunity – The Differentiation trial provides an opportunity to learn how we can motivate
Australians to buy ham and bacon made using Australian pork. Collaborating with the major
supply chains seeks to ensure we learn how we can help all stages in the value chain add value
to the categories.
Risk – Most Australians believe they are already buying ham and bacon made from Australian
pork. Asking them to change from imported product to actively look for Australian may
disappoint some shoppers when they realise that they had not been aware of this, potentially
reducing overall sales of ham and bacon. This risk is the reason a limited trial is planned.
10Australian Pork Limited Annual Operating Plan 2019-20
Key Performance Indicators
PROGRAMME Better Pork Pork Made More Popular Increasingly Different
Eating Quality Pathways Increased purchases of ham and
Industry Key Result Area Quantity of Regular Consumers
Performance bacon made with Australian pork
5 supply chains actively engaged in % of households eating fresh pork
Unit executing an Australian Pork Eating more than a given number of times Sales value and volume
Quality improvement programme per year
A timeline for each supply chain that 26 or more times per year – 3.7%
Target has a 2020 implementation target 13 or more times per year – 16.9% 10% increase in both
date
3.70%
Latest Measure 0 No current direct measure
17.90%
Level of Control Moderate Low Medium
Level of Impact High High High
Reporting Period Monthly Quarterly Two Monthly
Direct from supply chain Nielsen HomeScan® reported Data from within trial-targeted
Source/Comments
participants quarterly stores
Note: The “Pork Made More Popular” Key Results Area decreases because volume produced is budgeted to reduce by over 9% and resource has been re-
allocated from domestic fresh pork marketing to ham and bacon test-marketing and international marketing.
11Australian Pork Limited Annual Operating Plan 2019-20
PROGRAMME Better Pork Pork Made Popular Increasingly Different
APL Operational KPI Pork Image Attributes Advertising recall Message recall
Percentage agreement with “Pork is
low in fat” and “Australian Pork is a
% of Australians recalling pork % of Australians aware of main
Unit valuable source of iron”
advertising message
Easy to cook
Pork is versatile
15%
Target 48% 68% 40%
50%
16%
Latest Measure 49% 76% 0%
50%
Level of Control Moderate Moderate Moderate
Level of Impact Moderate High Moderate
Reporting Period Quarterly Quarterly Quarterly
Thrive advertising tracking latest Thrive advertising tracking, latest Thrive advertising tracking, latest
Source/Comments
measure measure measure
Note: The “Better Pork” and “Pork Made More Popular” Key Performance Indicators decrease because resource has been re-allocated from domestic fresh
pork marketing to ham and bacon test-marketing and international marketing.
12Australian Pork Limited Annual Operating Plan 2019-20
Strategic Objective 2: Building Markets
Industry Outcomes
The Strategic Plan outcome statement is “Using insights to develop markets that offer attractive
demand for our products, producers and our value chain collaborators”.
“Building Markets” Programme 1 seeks to uncover demand and commercial opportunities as well as
measuring demand performance against objectives. We use consumer, shopper and value chain
insights to drive all the activities in-market and improve the overall category offer and experience for
consumers. This is also an area of market information service to other divisions within APL, as
required.
Programme 2 involves working with retailers and supply chains to improve product and purchase
experience to increase conversion to purchase for pork, an attractive outcome for producers and
for all Australians. It also supports key APL initiatives through retail channels including driving quality
perceptions, cooking methods/instructions, inspirational meal solutions and new product
development.
Programme 3 plans for increased investment as part of striving to increasingly effectively compete
with other sources of pork in overseas markets.
Programme 1: Market Insights
This programme is responsible for the identification, quality control, validation and interpretation of
qualitative and quantitative data into market insights. This covers trade markets such as pig sale
volumes, prices and forecasts as well as consumer market, retail and foodservice sales domestically.
Whilst the quantitative information collected will continue to measure performance and outcomes,
the insights specialists who review and report the data spend most of their time in exploratory
mode, seeking to build new hypotheses about the future of demand and supply conditions.
This year particularly includes the completion, interrogation and interpretation of qualitative and
quantitative shopper research. This will focus on overall category understanding within context of
shopping touchpoints for fresh pork, or main dinner occasion, purchases.
Insights often come from comparing different sets of data. There is management time allocated to
transferring data sources to a data-warehouse to enable improved, comparison, storage, access,
accuracy, security and timely reporting of information to stakeholders.
Programme 2: Domestic Market Development
This programme benefits from increased investment, particularly in management time, which will be
invested collaborating more intensely with supply chains and retailers, on agreed priorities. It seeks
to identify and share by dialogue, insights about consumer and shopper behaviour with butchers,
restaurants, supermarkets, caterers and other consumer service businesses to help them improve
their businesses and Australian pork sales.
13Australian Pork Limited
To improve collaboration, we have expertise in category management, eating quality programme
management, retail account collaboration as well as expertise in foodservice, independent
supermarkets and butchers.
Programme 3: International Market Development
International markets have been given an increasing focus for the Australian pork industry in the
recent strategy update. In addition to the long-term goal of agreeing export protocols to enable
trade with China, six markets have been selected to intensify our presence in and search for new
business opportunities.
There is a significant increase in management time and project investment to accelerate our
international marketing programme as it becomes an increasingly important part of the Australian
pork industry. The programme is guided by major exporters in collaboration with APL. This is based
on the principle that any opportunities discovered need to be realised and commercially viable for
industry partners.
Whilst finding premium niche markets remains a challenging goal, recent industry history suggests
that growth will be better managed with an increased number of sources of demand.
Risks & Opportunities
Risk – The expanded consumer and channel research may stretch APL’s capacity to execute the
research to the usual high quality standards expected. New information is a currency that is a
requirement for fast moving retailers in partiular. This risk has largely already been mitigated
through the development of internal experts and a back-up network of tested consumer
research specialists and firms.
Risk – APL does not have as much experience in international market development as is the
case for domestic market development. In order to mitigate this risk, we will appoint in-
country experts to complete projects on market opportunities in the the selected six markets.
Opportunity – Increased time and focus with many collaborators in Australian and overseas,
gives us access to greater quantities of data, enabling additional insight and understanding,
hopefully resulting in improved activities and outcomes.
14Australian Pork Limited Annual Operating Plan 2019-20
Key Performance Indicators
International Market
PROGRAMME Market Insights Domestic Market Development
Development
Industry Key Result Area Pig Prices International Pork Sales Value
$/kg HSCW farm gate average YTD Million $ pork export value
Unit All Pigs Price per kg new markets
Baconer (latest week)
$3.62 $168.0 million
Target
$3.70 $4.00
$3.22 $135.5 million
Latest Measure
$3.29 $3.27 all product
Level of Control Low Low
Level of Impact High High
Reporting Period Quarterly Quarterly
APL latest measure mid-point between sellers
Source/comments ABS export data
and buyers price tracking. Latest data
15Australian Pork Limited Annual Operating Plan 2019-20
Domestic Market International Market
PROGRAMME Market Insights
Development Development
APL Operational KPI Programme Effectiveness through
Fresh Pork Consumption International Premium Business
Insights
Unit Number of significant learnings CWE kg fresh pork per person per Additional 5,000 tonnes at $4.40/kg
identified annum HSCW
Target
4 10.5 Yes
Latest Measure
0 11.54 (10.4% share) No current direct measure
Level of Control
High Low Moderate
Level of Impact
Moderate High Moderate
Reporting Period
Quarterly Quarterly Quarterly
Source/Comments “Significant” defined as 10% ABARES per capita consumption
improvement in efficiency or a value trend multiplied by Nielsen retail
Proof of shipment
to industry above $5m in producer volume share of fresh pork of total
profit meats (MAT)
Note: The “Domestic Market Development” Key Performance Indicator decreases because volume produced is budgeted to reduce by over 9% and
resource has been re-allocated from domestic fresh pork marketing to ham and bacon test-marketing and international marketing.
16Australian Pork Limited Annual Operating Plan 2019-20
Strategic Objective 3: Driving Value Chain
Integrity
Industry Outcomes
The Strategic Plan outcome statement is “Secured confidence in Australian pork products in terms
of their source, the compliance with expected standards and aligning on-farm product with
consumer expectations”.
Obviously, this strategic objective will undergo a transition year in 2019-20 as APL transitions to the
“Industry Solutions and Horizons model” outlined earlier in this document.
The focus of this year is to maintain the systems that have been developed by APL that will
differentiate Australian pork in terms of its provenance and engage in the commercialisation of
eating-experience research completed and published in the 2018-19 year. Taken together, these will
maintain consumer and community confidence and trust in Australian pork products in a year where
there will be significant media coverage of pig diseases overseas.
These initiatives will be delivered via a partnership approach with producers, government and supply
chain partners.
Programme 1: Trust in Pork Provenance
The need for greater transparency and traceability in the pork value chain is pivotal to maintaining
trust in Australian pork domestically. It is also critical to build export markets across the full range of
Australian pork products. The commercial value of the Physi-Trace™ system – so that it is regarded
by industry as a viable, industry accepted traceability tool that can reliably and cost-effectively
demonstrate the provenance of Australian pork and across a range of pork products – is still to be
recognised.
The key project aims to identify and validate system design and data analysis improvements to
underpin the commercialisation of the Physi-Trace.
Key outcomes from this programme will be the maintenance of Physi-Trace and verification of
provenance and label claims to gain stakeholder confidence in the industry’s traceability system. It is
likely that this may be leveraged overseas, particularly where the sources of pigs have become
increasingly important due to the spread of African swine fever. This programme is supported by the
APIQ® programme and PigPass to underpin the quality, integrity and traceability of Australian pork
products in both domestic and overseas markets.
Programme 2: Pork Quality Assured
The Australian Pork Industry Quality programme, APIQ®, is an on-farm quality assurance system
and is based on managing on-farm risks by following good agricultural practices, using the principles
of Hazard Analysis and managing Critical Control Points (HACCP).
17Australian Pork Limited Annual Operating Plan 2019-20
During 2018-19, the APIQ® system was “pressure tested” from a legal perspective. Combined with
an annual review of APIQ®, this will result in some improvements to help the system become
more enforceable in the case of illegal activities.
In addition, APL undertakes a number of activities to underpin the Pork - Australian Export Meat
Inspection System (Pork-AEMIS) that address food safety issues to assist the development of risk-
based systems to protect public health while minimising technical market access risks and assure
community and consumer trust.
The key focuses in this programme are:
(i) management of the APIQ® standards, systems, training and administration, including
relationships with the provider of third-party auditing services;
(ii) food safety R&D activities with a specific focus on standardising methodology used for
shelf life assessment and the development of national standards and recording
frameworks to enable consistencies in peri-mortem information provided to producers,
veterinarians and other key stakeholders by processors to be achieved. Supply chain
benefits arising from this activity together with those resulting from the revised
Australian Standard 4696 (once finalised) to implement the alternate inspection
procedures and disposition judgements for pork will be measured; and
(iii) the recruitment of new producers and facilities into the APIQ® fold.
Key outcomes from this programme will be ongoing adoption of APIQ® standards by producers
and recognition of the APIQ® programme by regulators, retailers and supply chain partners.
The science-based outcomes from the food safety programme will be used to support continuing
reforms of the export meat inspection, verification and certification system to reflect the needs of
the pork industry in its current and future markets.
In addition, these projects provide for the ongoing engagement with specific groups of stakeholders,
particularly with the Pork Processor Referral Group (PPRG) and specialist pig veterinarians.
Programme 3: Fairness in Risk and Reward
The sectors within the pork value chain need to be customer-focused and better linked to enable
the effective flow of market signals. The predictive eating quality model for pork, based on data
generated within the Pork CRC, needs further population and collaboration and integration with
industry systems to facilitate the rollout of an eating quality pathway programme to supply
consistently high quality pork to consumers. This may be the subject of a “Strategic Intent Business
Plan” in 2019.
18Australian Pork Limited Annual Operating Plan 2019-20
Risks & Opportunities
Risk – the use of the Physi-Trace technology by the pork industry could be limited by the
system’s design and the impact this has on its cost, reliability/robustness and timeliness of
delivery of traceback results. This is being mitigated by the development of software
programmes to improve timeliness of delivery of trace back results and reduce those costs
associated with data analysis to enable the use of this technology by the Australian pork industry
to support – or not – provenance and Australian claims.
Risk – the potential for supply chain partners to not engage and look to prevent reward to flow
to appropriate points within the supply chain. Whilst APL cannot ever claim to mitigate this risk,
closer engagement with partners via projects strengthens its relationships along the value chain
that may allow reward to flow to appropriate value chain partners.
Opportunity – ability for pig industry to demonstrate higher market compliance against agreed
standards.
Opportunity – ability for Australian pork to demonstrate its product integrity claims against
products made from imported pork.
Opportunity – improve the already high regard for and adoption of the Australian Pork Industry
Quality programme, APIQ®, by producers, retailers, and regulators.
Opportunity – provison of additional information to producers that informs on-farm health
status of pigs and general stock management.
Opportunity – increased agility and response to serious breaches of the APIQ® standards to
build confidence in, and drive uptake of, the APIQ® program by producers and downstream
stakeholders, including retailers.
Risk – not agile when dealing with critical breaches of the APIQ® standards resulting in
reputational damage to APIQ® and producer withdrawal from accreditation.
Opportunity – reinforce APIQ®’s independence to assure stakeholders of its objectivity.
Opportunity – utilise APIQ® to support new export market opportunities by demonstrating
that Australia produces high integrity pork in terms of food safety, animal welfare, biosecurity
and environmental management practices.
19Australian Pork Limited Annual Operating Plan 2019-20
Key Performance Indicators
PROGRAMME Trust in Pork provenance Pork Quality Assured Pork Quality Assured
Physi-Trace system
Industry Key Result Area APIQ® Uptake Food Safety R&D
commercialisation
Number of export pork
Commercialisation model Percentage certified APIQ® sows processors adopting standardised
Unit
developed of Australian sow herd language for peri-mortem reporting
of diseases/conditions
Commercialisation model agreed
Target 91% 3
and implemented
Latest Measure No current direct measure 88.9% 0
Level of Control Moderate Moderate Moderate
Level of Impact Moderate Moderate Moderate
Reporting Period Annual Annual Annual
Industry support for Physi-Trace’s
inclusion into pork’s traceability APIQ® certifications as recorded
Source/Comments R&D project outcomes
system through CRM
20Australian Pork Limited Annual Operating Plan 2019-20
Pork Quality
PROGRAMME Trust in Pork Provenance Pork Quality Assured
Assured
APIQ® Annual Systems Eating quality system
APL Operational KPI Physi-Trace commercialisation
Audit uptake
System operation meets operational targets for Number of non- Number of supply
Unit processor coverage (% of production), trace back costs, conformances and chains implementing
accuracy and timeliness. (both raw and processed) observations eating quality model
90% of production;
$5-7K per fresh pork traceback (with information);
≤ 1 non-conformance
Target 100% accuracy; 5
≤ 5 observations
Results delivered 7 days from date samples received by
laboratory
70% of production;Australian Pork Limited Annual Operating Plan 2019-20
Strategic Objective 4: Leading Sustainability
Industry Outcomes
The Strategic Plan outcome statement for this objective is “Remaining in step with society by
reflecting community values in our ethics, our healthy herds, and operating our industry responsibly
and profitably”.
The focus this year continues to deliver a suite of targeted projects under programmes that will
address community attitudes towards pig farming and deliver healthy herds and farms, whilst
continuing to improve productivity, particularly reproductive performance and feed conversion.
Projects that will build on our demonstrated societal leadership cover areas such as environmental
management, animal welfare, disease incursion capability, exotic disease risks, biosecurity and
reproductive health.
Critical to the success of this strategic objective are our contributions to the Pork RD&E Strategy,
the Feed Grain Partnership, National Animal Welfare RD&E Strategy and the Climate Research
Strategy for Primary Industries, and our partners, including the Australasian Pork Research Institute
Limited (APRIL), Animal Health Australia, and SAFEMEAT.
Programme 1: Addressing Societal Needs
A community which is better informed and educated about how pork is produced in Australia can
only continue to grow and foster community loyalty, trust and support. The Australian pork industry
has demonstrated global leadership in programmes such as “Shaping our Future”, which sought a
voluntary phase out of the industry’s use of gestation stalls by 2017. Societal expectations for
leadership and sustainability will focus a broad suite of programmes covering regulatory, policy and
community areas, with a focus on improving the image of our industry to maintain the confidence of
consumers, government, our markets and the Australian public.
This programme will seek to implement activities that will recognise and address societal needs for
the ethical and sustainable production of pork that will underpin whole of community trust. Ongoing
projects in this programme will look at collaborative activities with organisations such as Climate
Research Strategy for Primary Industries (CCRSPI), APRIL, and SAFEMEAT.
Others will seek continuing improvements of our high animal welfare standards and the planning
framework that governs development applications. Continuing APL’s leadership in environmental
management is demonstrated through the provision of best management practice (BMP) information,
investigation of new and emerging technologies, on farm greenhouse gas abatement and validation of
industry data such as odour emission rates.
Programme 2: Healthy Herds and Farms
To remain profitable, producers must safeguard the health and wellbeing of the pig herd, while
reducing input costs and improving productivity. Risks from the global trading environment, including
22Australian Pork Limited Annual Operating Plan 2019-20
the movement of people and goods, are ever present. Australia’s science-based biosecurity protocols
mean that we are one of the few countries in the world that has a pig herd with a high health status.
This is a highly valued asset, which underpins, supports and protects our reputation for pork quality
and safety.
This programme will provide knowledge covering a number of exotic pathogens to both inform and
underpin robust biosecurity protocols for both individual enterprises and industry to ensure that the
Australian pork industry remains free of the exotic pig pathogens that have devastating impacts on
pork industries in other countries. Ongoing projects include antimicrobial resistance and the ongoing
engagement with specific groups of stakeholders, especially with specialist pig veterinarians and
smallholder producers.
Other critical programmes involve APL collaborating with Animal Health Australia and the National
Livestock Identification System (NLIS), our emergency plan, PorkSAFE, and the review of the Model
Code of Practice for the Welfare of Animal: Pigs (now known as Standards and Guidelines for
Animal Welfare: Pigs).
Programme 3: Continuous Productivity Growth
Along with fresh pork, Australia’s pork biosecurity protocols also prohibit the importation of genetic
material and live pigs, including new genetic lines with higher productivity. As a result, the Australian
pig herd is a ‘closed herd’, which has consequential impacts on Australia’s on-farm productivity. Key
measures such as the cost of production and the number of pigs sold per sow per year lag
significantly behind North America and the EU countries. Nonetheless, the Australian pork industry’s
investment in continuous productivity growth is important to close the productivity gap.
This programme will consolidate its approach on the adoption and implementation of programmes
that underpin continuous productivity growth for the pork industry by focusing on optimising
production efficiencies through the use of feed additive technologies, demonstration of commercially
available precision livestock farming technologies suitable for Australian pig production systems and
enhancing the viability and efficacy of vaccines used for respiratory diseases.
The key outcome will be continuous productivity growth for the pork industry as seen by an
improved margin over feed cost (MOFC) through a decreased cost of production and an increase in
the number of pigs sold per sow per year.
APL is also collaborating in a number of Rural Research & Development For Profit (RRnD4P)
projects covering virtual herding and managing climate change impacts.
Risks & Opportunities
Risk – current industry profitability crunch will impact uptake of completed projects
Risk – attenuation or loss of government and societal support through major animal welfare
incidents
Risk – that non-compliance with traceability and biosecurity may inadvertently allow exotic and
endemic disease incursions to occur
23Australian Pork Limited Annual Operating Plan 2019-20
Risk – productivity and profitability improvements may be eroded by other factors outside of
the industry’s control
Risk – uncertainty in the legislative arrangements that underpin industry environmental
management and live pig traceability (PigPass) may erode continued leadership
Opportunity – industry ongoing demonstration of societal and global leadership in
environmental management and animal health and welfare
Opportunity – through traceability and on-farm and at-border biosecurity measures, ensure
Australia remains free of exotic diseases currently decimating pig herds across the world
Opportunity – to continue agricultural industry leadership in environmental management and
antimicrobial stewardship
Opportunity – investing in projects that identify unknown pig producers, which are identified by
governments as significant biosecurity risks to the pork industry
Opportunity – animal management practices of stock persons and herd health are enhanced
through the incorporation of precision farming technologies on-farm.
24Australian Pork Limited Annual Operating Plan 2019-20
Key Performance Indicators
Addressing Societal Continuous
PROGRAMME Healthy Herds and Farms
Needs Productivity Growth
African swine fever Antimicrobial Stewardship
Movement Reporting
Industry KPI Result Area remains an exotic disease (AMS) enterprise plan Pork Produced Per Sow
Within Two Days
to Australia uptake
% closed PPNVDs Australia remains free of Percentage of production Percentage increase in kg
Unit reported within two days ASF implementing AMS pork/sow/year
Target 90% No incursion 50% 3%
Latest Measure 69.7% No incursion 60% 2.3%
Level of Control Low Low Medium Low
Level of Impact Medium High Medium High
Reporting Period Annual Annual Annual Annual
OIE’s World Animal
Source/Comments PigPass database APL Industry Survey 2018 APL/ABS data
Health Information System
Note: improvement in the percentage of PPNVDs closed within two days is dependent on the state and territory governments introducing mandatory
legislation. At the time of AOP completion, only NSW and SA had completed the necessary legislative changes and were implementing compliance activities.
25Australian Pork Limited Annual Operating Plan 2019-20
Addressing Societal Continuous
PROGRAMME Healthy Herds and Farms
Needs Productivity Growth
Internal biosecurity Reducing pre-weaning
APL Operational KPI GSF Uptake – APIQ® ASF Preparedness Plan preparedness mortality
Percentage of commercial Percentage reduction in
Percentage of industry producers who have pre-weaning mortality
An ASF preparedness plan
Unit sows housed under updated their biosecurity
is developed
APIQ® GSF definition plan over the past 12
months
90% 3%
Target 80% 1 plan
No current direct No current direct
Latest Measure 78% 0
measure measure
Moderate Low
Level of Control Moderate Moderate
High High
Level of Impact High Low
Annual Annual
Reporting Period Annual Annual
CRM/APIQ® audits: 8+ APL Industry Survey APL Research Reports
Source/Comments APL
sows only
26Australian Pork Limited
Strategic Objective 5: Improving Capability
Industry Outcomes
The Strategic Plan outcome statement for this objective is “The Australian pork industry and APL
leading the way in innovation, accountability and unity”.
It is a requirement of APL’s Funding Agreement with government that APL undertakes a
performance review. During the last financial year, APL engaged a consultant to undertake the
performance review in accordance with the requirements of APL’s Funding Agreement. While the
consultant described APL as an organisation which is ‘… highly collaborative, working with other supply
chain participants, RDCs, semi-government bodies and others’, there are always opportunities to improve
operational capability.
APL will adopt the recommendations of the consultant generally. Some of the key recommendations
include:
• ‘… ensure a more strategic and co-ordinated approach to APL’s engagement with growers
and other stakeholders …’
• ‘Upgrade the evaluation framework, in association with the development of the next
strategic plan…’
• ‘… publishing short summaries of key documents … to enhance the company’s transparency
in planning and reporting…’
• ‘… including annual impact assessment results in the annual report and in a short annual
performance evaluation report …’
APL will strive to action the recommendations from the performance review and some planned
actions are described within Strategic Objective 5.
The 2019-20 operational year will see continued focus on encouraging industry adoption of available
technologies. The increasing availability of mobile phone, iPad and tablet applications, together with
an incremental improvement in connectivity will support the increasingly better informed and
connected stakeholder base. Achieving efficiencies using technology and adopting technology
solutions as a business as usual tool throughout the entire pork supply chain continues to be an APL
priority as improved connectivity and availability of relevant online tools supports the industry’s
capacity to compete on cost and to identify production and market opportunities.
APL continually strives for business efficiencies that reflect the organisation’s leadership amongst the
fifteen Rural Research and Development Corporations, demonstrating value for the industry for
levies paid by pork producers and R&D matching funds from the Australian Government.
Programme 1: Applied Learnings
Stakeholders are increasingly accessing and pushing information through a range of communication
channels that specifically suit their needs. Modern IT solutions, social media and traditional face-to-
face engagement are the predominant communication channels.
27Australian Pork Limited
This programme will focus on refining our IT platforms to improve our reach to better enable our
transfer and adoption of technologies developed. Our programmes will also continue to utilise the
valuable network channels that key influencer groups provide to more effectively disseminate our
messages to increase their awareness of new technologies and the expected benefits resulting from
the adoption of these technologies, especially on-farm by producers.
APL continues to work toward enhancing the capacity and capability of students, industry and
research providers to implement technologies on farm, develop solutions across a range of the
supply chain disciplines as well as develop a course for young industry leaders to strengthen their
skills, capability and vision for the future of the Australian pork industry. The key outcome will be a
shorter lag time between the development and adoption of technologies, which ultimately results in
improved productivity across the whole supply chain.
APL will develop further capability in understanding production metrics with the APL benchmarking
programme. The benchmarking programme will provide insights to key production efficiency and
effectiveness opportunities. Identification of these opportunities will influence R&D spending in the
future.
Programme 2: Building Industry Image and Reputation
APL has sought to increase its engagement with industry. This has been achieved by trialling a new
APL publication, the APL Update, and by supporting a variety of producers to attend the bi-annual
Delegates’ Forums.
The APL Update focuses on pushing producer influenced content through the media channels
requested by producers. The feedback from the trial publication has been positive and the APL
Update is now a permanent feature of APL’s regular communications.
During the last year, APL supported small and young producers and producers nominated by State
Farming organisations to attend and participate in the bi-annual Delegates’ Forums. This trial has
seen APL communicate with a broader range of Australian pork producers than we have been able
to reach through other communication channels. This year will see a continuation of that support.
Programme 3: Operational Effectiveness
While as a matter of best practice, APL continually seeks business efficiency improvement
opportunities, the Board and APL team are demonstrating a willingness to challenge and improve the
way operational things are done. The primary beneficiaries of efficiency gains are members and key
stakeholders (levy payers and the Australian Government). Operational effectiveness projects are
designed to ensure APL is an organisation with a corporate governance culture that exceeds its
obligations as well as being a safe and fair work place.
APL has commenced building internal industry intelligence capability. APL now has capability to
electronically capture data from multiple sources. Capturing and processing data electronically is
proving to be a secure way to collect, store and process data in a timely manner. The data insights
are already being used internally for decision making. APL continues to have an aspiration to
progressively make more industry insights available to APL members.
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